Australian Securities and Investments Commission v Australian Investors Forum Pty Ltd

[2004] NSWSC 491

CITATION:	ASIC v Australian Investors Forum Pty Ltd & Ors [2004] NSWSC 491
HEARING DATE(S):	2 and 3 June 2004
JUDGMENT DATE:	3 June 2004
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
DECISION:	Notice held valid; Defendants to pay costs of application on indemnity basis.
CATCHWORDS:	CORPORATIONS - EVIDENCE - INDEMNITY COSTS - Notice under s.79(1) ASIC Act - meaning of "specified statements" - how they may be identified - whether Notice under s.79(1) needs to be signed - whether indemnity costs should be ordered where unsuccessful party has advanced a case without merit and with no reputable argument to support it.
LEGISLATION CITED:	- Australian Securities and Investments Commission Act 2001 (Cth) - s.5, s.19, s.76(3), s.79(1) - Corporations Act 2001 (Cth) - Part 3 Div 9, s.206E, s.461(1), s.1317H, s.1324(10) - Evidence Act 1995 (NSW) - s.167C, s.169(1)
PARTIES :	Plaintiff: Australian Securities & Investments Commission First Defendant: Australian Investors Forum Pty Ltd Second Defendant: Dennis Ralph Anthony Third Defendant: Martin Lloyd Cocks Fourth Defendant: Dominic Luvara Fifth Defendant: Peter Victor Topperwien Sixth Defendant: Bud Shaheen Seventh Defendant: Australian Capital Forum Pty Ltd Eighth Defendant: Medionics Pty Ltd Ninth Defendant: Sage Global Fund Ltd Tenth Defendant: Techlogica Pty Ltd Eleventh Defendant: Suisse Credit Pty Ltd Twelfth Defendant: Swiss Pacific Inc Thirteenth Defendant: Nominee Securities Pty Ltd Fourteenth Defendant: Finance Projects Pty Ltd Fifteenth Defendant: Money Mint Pty Ltd Sixteenth Defendant: Casabanca Pty Ltd Seventeenth Defendant: Business Franchises Pty Ltd Eighteenth Defendant: Webfeatures Pty Ltd Nineteenth Defendant: Sacvere Pty Ltd Twentieth Defendant: Associated Asset Management Twenty-first Defendant: IT Genius Pty Ltd Twenty-second Defendant: Moneytec Investment Management Ltd Twenty-third Defendant: Metrobank Pty Ltd Twenty-fourth Defendant: Australian Equity Forum Pty Ltd Twenty-fifth Defendant: Tax Law Accounting Pty Ltd Twenty-sixth Defendant: Tax Law Accounting Partnership Pty Ltd Twenty-seventh Defendant: Biotech Securities Ltd Twenty-eighth Defendant: Arbitrage Trading Pty Ltd Twenty-ninth Defendants: Whitton & Lombe
FILE NUMBER(S):	SC 5164/01
COUNSEL:	D.R. Stack - Plaintiff J.T. Johnson - 5th, 22nd and 28th Defendants
SOLICITORS:	Australian Securities & Investments Commission - Plaintiff Anderson Lawyers - 5th, 22nd and 28th Defendants

Ex tempore

1 The Plaintiff (“ASIC”) has commenced proceedings against Australian Investors Forum Pty Ltd (“AIF”) and a number of defendants including Peter Victor Topperwein and two companies associated with him, namely, Moneytec Investment Management Ltd and Arbitrage Trading Pty Ltd. ASIC claims compensation orders against the defendants under s.1317H and s.1324(10) Corporations Act 2001 (Cth) (“ CA ”), orders under s.206E that the personal defendants, including Mr Topperwein, be disqualified from managing corporations, and a winding up order under s.461(1)(k) CA against the corporate defendants. For convenience, I will refer to Mr Topperwein and the two companies associated with him as “the Topperwein Parties”. 2 In the course of investigating the affairs of AIF, ASIC has conducted examinations under s.19 of the Australian Securities and Investments Commission Act 2001 (Cth) ( “ASIC Act ”) of Messrs Robert Appleby, Bud Shaheen, Bradley Goodsell and Dennis Faroungas. 3 By a Notice purportedly given under s.79(1) ASIC Act , dated 17 June 2003 and signed by a person identified as “Conrad Gray, Senior Lawyer and duly authorised delegate of the Australian Securities and Investments Commission” , ASIC advised the Topperwein Parties that it would apply to have admitted as evidence in these proceedings “specified statements” , being the entire transcripts of the examinations of Mr Appleby on 8 October 2001, Mr Shaheen on 9 October 2001 and 6 June 2002, Mr Goodsell on 16 October 2001, and Mr Faroungas on 19 June 2002. 4 By letter dated 20 June 2003, the solicitors for the Topperwein Parties objected that the Notice was invalid because it did not specify any particular statements within the transcripts, as was required by s.79(2) ASIC Act . Further, the letter requested a copy of the delegation held by Conrad Gray entitling him to sign the Notice and the name of the person who signed the Notice. 5 In response to this letter, ASIC gave a further Notice under s.79(1) ASIC Act dated 30 June 2003. Again, the Notice was signed by a person identifying himself as Conrad Gray, in the same terms as had appeared in the first Notice. The fresh Notice identified the “specified statements” which ASIC would seek to have admitted in the proceedings by identifying within the transcripts of the evidence of Messrs Appleby, Shaheen, Goodsell and Faroungas previously supplied to the Topperwein Parties portions defined by page number and line number. So, for example, the first statement of Mr Robert Appleby was “specified” by stating that it commenced on page 8 line 7, and ended at page 9 line 7 of the transcript of his examination on 8 October 2001. 6    In a transcript of fifty-one pages of the examination of Mr Appleby, there are twelve “specified statements” identified in the Notice in this way. Some of the passages identified are a few lines on the same page, some are within the same page, some are two or three pages in length. 7    Each passage of transcript thus identified does not comprise a single statement of a single fact by the witness. Rather, it contains a series of questions and answers concerned with a particular topic – for example, how the witness came to work with AIF and who else was working there at the time, or what were the witness’ duties as an employee, and so on. The “specified statements” in the transcripts of evidence of the other witnesses referred to in the Notice are identified in the same way. 8 Mr Johnson of Counsel, who appears for the Topperwein Parties, says that the Notice of 30 June 2003 is invalid because it does not comply with s.79 ASIC Act . That section is in the following terms:

“ Objection to admission of statements made at examination

(1) A party (the adducing party) to a proceeding may, not less than 14 days before the first day of the hearing of the proceeding, give to another party to the proceeding written notice that the adducing party:

(a) will apply to have admitted in evidence in the proceeding specified statements made at an examination; and

(b) for that purpose, will apply to have evidence of those statements admitted in the proceeding.

(2) A notice under subsection (1) must set out, or be accompanied by writing that sets out, the specified statements.

(3) Within 14 days after a notice is given under subsection (1), the other party may give to the adducing party a written notice:

(a) stating that the other party objects to specified statements being admitted in evidence in the proceeding; and

(b) specifies, in relation to each of those statements, the grounds of objection.

(4) The period prescribed by subsection (3) may be extended by the court or tribunal or by agreement between the parties concerned.

(5) On receiving a notice given under subsection (3), the adducing party must give to the court or tribunal a copy of:

(a) the notice under subsection (1) and any writing that subsection (2) required to accompany that notice; and

(b) the notice under subsection (3).

(6) Where subsection (5) is complied with, the court or tribunal may either:

(a) determine the objections as a preliminary point before the hearing of the proceeding begins; or

(b) defer determination of the objections until the hearing.

(7) Where a notice has been given in accordance with subsections (1) and (2), the other party is not entitled to object at the hearing of the proceeding to a statement specified in the notice being admitted in evidence in the proceeding, unless:

(a) the other party has, in accordance with subsection (3), objected to the statement being so admitted; or

(b) the court or tribunal gives the other party leave to object to the statement being so admitted.”
9 Mr Johnson submits that s.79(2) does not permit “statements” to be specified “in a global way” , as he says is done by identifying particular passages of transcript. Such passages, he says, contain not merely statements by the witness but the questions of the examiner which elicited those statements. Further, he says, there is obviously more than one statement of fact in any identified passage. 10 The logical result of Mr Johnson’s submission, if it is correct, is that if statements in an examination covering many, perhaps hundreds, of pages of transcript are to be tendered under s.79 ASIC Act , the Notice, by virtue of s.79(2), must set out or identify separately each statement of each single fact by the witness and, in so doing, must exclude the question which elicited it. No authority has been cited by Mr Johnson in support of this submission. In my opinion, it is utterly without substance. 11 The words “specified statements” appearing in s.79(1) and (2) must be given a practical meaning according to the context in which s.79 is to operate and having regard to the purpose which it is intended to achieve. The “statements” are, clearly, statements made by a witness in the course of oral examination. Part 3 Div 9 CA expressly contemplates in s.76(3) that transcript of an oral examination may be tendered as evidence of the statements to be relied upon. As anyone having the slightest experience of oral examination knows, answers in such an examination often cannot be understood without reference to the questions which elicited them. Sometimes answers are discursive, disjointed or partly non-responsive. Sometimes answers are misleading or even unintelligible unless they are read in the context of possibly lengthy passages of transcript. The requirements of s.79(2) must be understood in the light of these realities, as the ASIC Act itself expressly recognises, by the definition of “statements” in s.5:
“‘Statement’ in relation to an examination, includes a question asked, an answer given and any other comment or remark made, at this examination.”
12 Section 79(2) does not require that a Notice itself reproduce the statements to be tendered: the Notice may be “accompanied by a writing” which sets out the specified statements. The “writing” may comprise the transcript of the examination if the passages containing the “specified statements” are identified with particularity in the Notice. If this is done, the evident purpose of s.79 is served, namely, to give other parties to the proceedings sufficient and timely notice of the evidence from s.19 examinations to be tendered by the adducing party so that those parties may formulate objections and, if appropriate, the objections may be determined pursuant to s.79(5) and (6) before the hearing of the proceeding begins. 13 Mr Johnson has not sought to demonstrate that specifying the “statements” to be tendered from the transcripts of the relevant examinations in the manner undertaken by the Notice of 30 June 2003 has caused the Topperwein Parties any difficulty in identifying what the statements are for the purpose of considering their objections. 14    In my opinion, the Notice of 30 June 2003 incorporates by reference the identified portions of the transcripts previously supplied and, accordingly, properly sets out the “specified statements” appearing in those transcripts, within the meaning of s.79(2). 15 Mr Johnson raised a further objection to the validity of the Notice. He said that the Topperwein Parties, in their solicitors’ letter of 20 June 2003, had requested a copy of Mr Gray’s delegation entitling him to sign the Notice but that that request had not been satisfied by ASIC. He submitted that upon this ground the tender of the specified statements in the transcripts of evidence could be rejected. 16 Mr Stack, who appears for ASIC, submits that s.79(1) requires only that the adducing party give to another party “written notice” of the matters stated in sub-paragraphs (a) and (b) – the subsection does not require that the Notice be signed by anyone in particular or, indeed, that it be signed at all. 17 In my opinion, Mr Stack’s submission is correct. It is quite understandable that s.79(1) does not specify that a Notice under the section is to be signed in any particular way or pursuant to any particular authority because such a Notice may be given not only by ASIC but by a variety of people, such as liquidators, creditors, or members of companies, who bring proceedings in which statements made in examinations under the ASIC Act may be admissible. 18    Mr Johnson did not dispute that the Notice dated 30 June 2003 was “given” by ASIC. At first he sought to maintain his submission but eventually he abandoned it. The submission was entirely without substance and it should never have been made. 19 Finally, Mr Johnson submitted yesterday that his solicitor had requested to be provided with a copy of the delegation pursuant to which the officer of ASIC had conducted the relevant examinations under s.19 ASIC Act . He said that this request had been made a long time ago but had not been complied with by ASIC. 20 When asked how the request and ASIC’s refusal related to the validity of the Notice under s.79 ASIC Act , Mr Johnson said that the request was a “reasonable request” for a document for the purpose of determining a question relating to the admissibility of the examination transcripts within the provisions of s.167(c) Evidence Act 1995 (NSW) and that refusal of the request could lead to an order under s.169(1)(c) that the relevant statements in the examination transcripts not be admitted in evidence. 21 In my opinion, the possible exclusion of evidence pursuant to s.169(1)(c) Evidence Act has nothing to do with whether or not the Notice under s.79 ASIC Act dated 30 June 2003 was validly given. It is quite a separate issue. 22 When this submission was made by Mr Johnson, Mr Stack objected that this complaint had never previously been raised. Further, he did not concede that the Topperwein Parties had ever requested ASIC to produce a copy of the delegation under which the s.19 examinations had been conducted. 23 When I asked Mr Johnson what evidence he relied upon to found his submission that a request for a copy of the delegation had been made and refused, he said that there was some correspondence but he did not have a copy with him. In that circumstance, I adjourned the hearing until today. 24 When the matter was called on before me this morning, Mr Johnson informed me that he abandoned this submission and conceded that this point had nothing to do with the validity of the Notice under s.79 ASIC Act . 25 In these circumstances, none of the submissions made in opposition to the validity of the s.79 Notice dated 30 June 2003 has succeeded. I hold that the Notice is valid.

[Counsel addressed re costs.]

26 Mr Stack seeks an indemnity costs order. Mr Johnson opposes such an order, saying that there were in issue in this application two Notices under s.79: the first dated 17 June 2003, which had not been expressly withdrawn by ASIC, and the second dated 30 June 2003. He says that, as will have appeared from my reasons, the first Notice would have been held invalid for the reasons that have validated the second Notice. He, therefore, opposes an indemnity costs order on the basis that there was utility in this application. 27 In my opinion, having regard to the terms of a letter from ASIC to the Defendants' solicitors dated 11 May 2004, it is quite clear that the second Notice of 30 June 2003 was issued to avoid the debate which has in fact taken place yesterday and today. It was the position of ASIC that whether or not the first Notice was valid for the reasons advanced by the Defendants – a position which it was not prepared to concede – nevertheless, for the purposes of advancing the litigation further and to avoid the very dispute which has occurred, it had issued and relied upon the second Notice dated 30 June 2003. In the course of the debate which occurred before me yesterday and this morning, I should note that Mr Johnson's submissions were not directed to the first Notice. They were specifically directed to the way in which he said the second Notice of 30 June failed to comply with the requirements of s.79. 28 As I have observed in the reasons which I have given, the submissions as to the invalidity of the Notice of 30 June 2003 made by Mr Johnson were without any substance. In my opinion, there was not a respectable argument in support of those submissions and I do not think that they should have been made. The Plaintiff should not have been put to the expense and trouble of having to deal with them. 29 Litigation is never a game in which one party is to be permitted to create delays and difficulties for the other by making hopeless applications which, nevertheless, require time, expense and trouble to overcome, risking in so doing only an adverse party/party costs order in the process. This is especially so in litigation which involves the public interest, as this litigation does. In my opinion, where a court sees that an application has been made which is devoid of any merit, devoid of any foundation in law, and has no respectable argument to support it, the court should express its strong disapprobation by ordering that the unsuccessful party pay the successful party’s costs on the indemnity basis, and that those costs be assessed and paid forthwith. 30 In my view, such an order is proper in the present case. I order that the Fifth, Twenty-second and Twenty-eighth Defendants pay the costs of the Plaintiff of and incidental to those Defendants’ application as to the Plaintiff's Notice under s.79 ASIC Act dated 30 June 2003 on an indemnity basis and that those costs be assessed and paid forthwith. The parties’ costs relating to the Notice dated 17 June 2003 will be reserved. The exhibits may be returned.
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Last Modified: 06/07/2004